One of the problems with "Indian Gambling" is the Sovereign Rights of Tribes to reneg on legitimate debts and agreements.
El Dorado County Court Issues Tentative Ruling on $30 Million Judgment
The El Dorado County Superior Court issued a tentative ruling this week that would prevent Sharp Image Gaming, Inc. from collecting on its $30 million judgment against the Shingle Springs Band of Miwok Indians (Tribe) while it appeals the judgment to a higher court.
In an effort to overturn the ruling in favor of the Tribe, Sharp's attorneys argued on a theory that Red Hawk Casino's revenues could be collected without consideration of the bondholders' prior rights, because the bond indenture had not been approved by the federal government and was, therefore, invalid.
"We are confident the Court will stand by its original ruling, and reject Sharp's effort to collect on a judgment while we appeal to a higher court," said Nicholas Fonseca, Chairman of the Tribe. "The fact is the federal agency that oversees gaming contracts confirmed that our bond indenture was, in fact, valid. So that's the end of it."
The Court has given the Tribe an opportunity to address Sharp's arguments in written briefing, and the Tribe will present the documentation demonstrating the agency's action. The matter should be resolved within weeks.
SHINGLE SPRINGS RANCHERIA
Jury verdict may force Red Hawk Casino's closure, Shingle Springs tribe says
By Dale Kasler
The owners of Red Hawk Casino say they may have to close the 3-year-old gambling palace following a devastating $30 million jury verdict.
With its financial pressures intensifying, the Shingle Springs Band of Miwok Indians warned in court papers of a "doomsday scenario" if the cash-poor tribe is forced to pay the December judgment. Under that scenario, the tribe said lenders would take steps to seize the casino's cash, forcing Red Hawk out of business.
"Any efforts to presently execute on the judgment would likely have catastrophic consequences for the tribe and all who depend on the casino for their livelihood," tribal attorney Sanford Kingsley wrote in a recent filing in El Dorado Superior Court.
The Shingle Springs casino employs 1,350 workers.
A jury in December awarded $30 million to Sharp Image Gaming Inc., the tribe's former business partner, over a breach-of-contract dispute. Sharp said the tribe reneged on an agreement for the company to supply slot machines.
Sharp Image lawyer Matthew Jacobs called the tribe's shutdown warning nonsense. He said in court papers that the tribe's creditors would do everything they could to keep the Highway 50 facility going.
For now, Sharp Image won't collect on the judgment. A judge issued a tentative ruling this week preserving the status quo, the tribe said Friday. A final ruling on the issue is expected in a couple of weeks.
Nevertheless, the tribe's warning provides fresh evidence of the dire financial circumstances that have enveloped the Shingle Springs band, which owes its casino creditors a combined $598 million.
Because of its financial troubles, the tribe said it's having trouble pursuing an appeal of the December verdict. If the verdict stands, the tribe could default on its debts.
The tribe's warning also makes it increasingly likely that the casino's future will be the subject of a lengthy and convoluted legal battle, with bondholders and other creditors fighting the tribe and each other over assets.
This fight will surely be complicated by the doctrine of sovereign immunity, which generally protects tribes against legal claims and puts the Shingle Springs tribe's most important assets – including the casino – out of creditors' reach.
"You can't take their land, you can't take the building," said Nelson Rose, an Indian gambling law expert at Whittier College. "I guess you could take the slot machines."
Gregory Guedel, an Indian gambling lawyer in Seattle who is not connected to the case, said bondholders and other creditors will probably have to negotiate a settlement with the tribe to stretch out debt payments while keeping the casino open.
That's what happened at tribal-owned Foxwoods Casino in Connecticut – the world's largest – which defaulted on $2 billion in debts two years ago.
Aside from the hurdles presented by the tribe's sovereign status, it simply makes more sense for creditors to work out a deal with the tribe.
"It's still better to have a trickle of money coming in" than to have the casino fold, Guedel said.
As it is, the tribe has temporarily halted principal payments on a $66 million startup loan from Red Hawk's outside management firm, Lakes Entertainment Inc., because of the casino's weak cash flow.
Red Hawk pays millions of dollars each year to the state and El Dorado County under a compact that the Shingle Springs band signed with former Gov. Arnold Schwarzenegger.
"It would be unfortunate, certainly, if they went out of business," said Terri Daly, chief administrative officer for El Dorado County. "They're a good employer in the county."
For the impoverished Indian tribe that owns it, however, the casino has been anything but a winner. Since its December 2008 opening, gambling revenue has fallen about $100 million a year short of the tribe's projections, according to trial testimony. Individual tribal members are receiving $800 a month in profit distributions.
At times, the casino doesn't produce enough profit to meet the $500,000 monthly minimum guaranteed to the tribe – forcing Lakes Entertainment to loan the tribe money, according to Lakes' filings with the Securities and Exchange Commission.
Those monthly loans from Lakes are separate from the $66 million startup loan.
The $30 million jury verdict has turned the tribe's troubles into a full-blown crisis. Court records show the verdict, if it stands, could trigger a default on the tribe's single biggest debt – a $450 million bond.
Moody's Investors Service last month lowered its ratings outlook on the tribe's gambling authority from "stable" to "negative," citing the possibility of bond default. The gambling authority's credit rating is Caa2, which Moody's defines as a "high credit risk."
The tribe wants to appeal the El Dorado County jury verdict but first needs to post a $45 million bond – one and a half times the judgment for Sharp Image. Because most of its casino revenue is pledged to other creditors, and the casino is legally off-limits, the tribe said in court papers it doesn't have the "free and clear assets required as collateral" to acquire the bond.
Lawyers for the tribe have asked Superior Court Judge Nelson Brooks to waive the bond requirement. Jacobs, the lawyer for Sharp Image, has objected, saying that the tribe is exaggerating its financial problems.
"The tribe's prediction of economic catastrophe is purely speculative," he wrote in a court filing.
After making a tentative ruling this week in the tribe's favor, Brooks is expected to make a final decision soon.
Guedel said shutdowns of tribal casinos are rare but not unprecedented. The Lucky Dog Casino in Washington state, owned by the Skokomish Tribe, closed in September 2009. Tribal officials blamed the recession.
The casino reopened 10 months later, however.
Read more here: http://www.sacbee.com/2012/02/25/4289725/jury-verdict-may-force-red-hawk.html#storylink=cpy
Showing posts with label Red Hawk. Show all posts
Showing posts with label Red Hawk. Show all posts
Sunday, February 26, 2012
Saturday, February 18, 2012
Missing Carmichael Woman Last Seen At Casino
UPDATE: Missing Carmichael Woman Last Seen At Casino
CARMICHAEL (CBS13) – A Carmichael woman missing since Wednesday was spotted on surveillance tape leaving Red Hawk Casino in Shingle Springs, according to the Sacramento Sheriff’s Department.
Melodie Benton, 55, also know as Melodie Rowan, left her place of employment in Folsom on Wednesday at about 2 p.m. and was spotted leaving the casino at 8 p.m. that night, according to Deputy Jason Ramos. The sheriff’s department said she is considered to be at-risk because her disappearance is highly inconsistent with her normal behavior patterns.
Benton is described as Native-American female, 5 feet, 3 inches tall and weighing about 150 pounds. She has long, straight black hair and brown eyes. She was last seen wearing a black turtle neck with a bright green vest over it, and a black hoodie with white trim when she left Red Hawk Casino.
Benton drives a red and silver 2001 Chevrolet Monte Carlo (California license No. 4XOS962) with a black Tasmanian Devil sticker on the back left window. She is known to frequent Indian casinos.
CARMICHAEL (CBS13) – A Carmichael woman missing since Wednesday was spotted on surveillance tape leaving Red Hawk Casino in Shingle Springs, according to the Sacramento Sheriff’s Department.
Melodie Benton, 55, also know as Melodie Rowan, left her place of employment in Folsom on Wednesday at about 2 p.m. and was spotted leaving the casino at 8 p.m. that night, according to Deputy Jason Ramos. The sheriff’s department said she is considered to be at-risk because her disappearance is highly inconsistent with her normal behavior patterns.
Benton is described as Native-American female, 5 feet, 3 inches tall and weighing about 150 pounds. She has long, straight black hair and brown eyes. She was last seen wearing a black turtle neck with a bright green vest over it, and a black hoodie with white trim when she left Red Hawk Casino.
Benton drives a red and silver 2001 Chevrolet Monte Carlo (California license No. 4XOS962) with a black Tasmanian Devil sticker on the back left window. She is known to frequent Indian casinos.
Friday, December 23, 2011
Shingle Springs Defeats Slot Machine Supplier's Claim for $250 Million
SOURCE: Red Hawk Casino
Shingle Springs Defeats Slot Machine Supplier's Claim for $250 Million
PLACERVILLE, CA--(Marketwire - Dec 23, 2011) - On Dec. 22, 2011, an El Dorado County jury rejected a gaming machine supplier's claim for $250 million in damages against the Shingle Springs Band of Miwok Indians, in connection with the Tribe's cancellation of a machine lease agreement in 1999 for a failed tent casino venture called Crystal Mountain.
The jury did award a lesser amount of damages to Sharp Image Gaming, Inc., in the amount of $20.4 million, over the gaming contract, which the United States government has declared illegal and unenforceable -- a fact that the jury was not allowed to know. The jury also awarded an additional $10 million for monies invested in the failed venture. The Tribe will appeal.
"We will never stop defending ourselves against Sharp's effort to enrich itself through an illegal contract, which the Tribe cancelled in 1999, since the Tribe could not participate in an illegal agreement," said Nicholas Fonseca, Chairman of the Tribe. "The irony is not only that the federal government has deemed Sharp's contract illegal, but that the State's Bureau of Gambling Control has found Sharp to be unsuitable to sell or lease gaming machines in the State of California."
The jury was not allowed to know key pieces of evidence, including the fact that the federal agency that regulates Indian gaming and that is charged with reviewing gaming contracts -- the National Indian Gaming Commission -- issued a finding that Sharp's contract violated federal law and was thus illegal and void.
That finding -- issued in April 2009 -- was the result of a formal administrative proceeding in which Sharp participated.
The agency found that Sharp's contract violated federal law in a number of ways, including overreaching provisions that purportedly gave the contractor 30 percent "off the top" of all casino revenues, even before operating expenses. The NIGC's final agency action was consistent with earlier agency conclusions about the contract's illegal status; agency representatives told the Tribe in 1998 and 1999 that the contract would not pass federal muster and would not be federally approved as the law requires. After Sharp sued for alleged breach of contract in 2007, the NIGC's general counsel issued a publicly-available advisory opinion in 2008 that found the contract violates federal law and is void. The jury was not allowed to know about the 2008 NIGC opinion either.
Backed by case precedent and clear law, the Tribe's position is that the NIGC's final agency action in 2009 legally barred Sharp's ability to enforce its overreaching contract in state court. The state court rejected that position, and found that the NIGC's voiding of the contract does not matter. The Tribe filed suit in federal court to enforce that NIGC's federal agency action, and that federal lawsuit remains pending.
The jury also was unaware that Sharp is out of business and could not have supplied gaming machines to the Tribe anyway. The California Bureau of Gambling Control, which is the agency within the Department of Justice charged with protecting the integrity of gaming in the State of California, recommended to the California Gambling Control Commission that Sharp be found "unsuitable" to sell or lease gaming machine contracts in the State. This action was based on an investigation into Sharp and its principal, Chris Anderson, and came in November 2008, a month before Red Hawk opened to the public in December 2008.
"Because of that finding by the Bureau, we could not have used Sharp's machines under our Compact, even if Sharp remained in business," Chairman Fonseca said. "So the idea that Sharp somehow suffered money damages from being denied the right to supply gaming machines that it could not legally supply to anyone in this state makes no sense. It is really too bad the jury was not able to know this fact either."
Sharp had entered the contract with the Tribe in 1997, in an effort to establish gaming on the Tribe's reservation through a temporary tent facility. However, the lack of access to the Tribe's then landlocked reservation doomed the effort. The Tribe terminated the contract in 1999, after Sharp acknowledged it was unable to resolve the access problem for the reservation and based on information received from NIGC and BIA officials that the contract violated federal requirements.
The Tribe then proceeded to secure access for its reservation with the assistance of new and independent financial investors. The reservation became landlocked in the 1960s through the realignment of Highway 50. Although the access problem was not of the Tribe's making and could have been resolved by the Department of Interior for a cost of less than $5,000, the Tribe ultimately was only able to secure the access that was essential to any economic development on the reservation, including a gaming facility, through its own development of a highway interchange, which ultimately cost the Tribe nearly $70 million to construct and which faced years of legal challenges. After defeating those legal challenges and after beginning construction of the interchange and Red Hawk Casino, Sharp filed suit, claiming the exclusive right to supply all gaming machines to Red Hawk, and seeking 30 percent gross profits from Red Hawk revenues without performing at Red Hawk or being involved in its development in any way. Sharp claims the right to be paid before all others paid by Red Hawk, including the investors who assumed the risk of developing Red Hawk and the lenders who financed it.
"Because of evidentiary rulings that kept critical evidence from the jury, the Tribe was literally left without the ability to defend itself," said Ivor Samson, lead trial counsel for the Tribe. "We are confident that at the end of the day, an appellate court will be surprised by the sheer degree and number of serious legal errors infecting the rulings at the trial court level, and that the Tribe's rights ultimately will be vindicated, and the rulings reversed on the merits."
Sharp was a significant supplier of gaming devices during what is known as the "gray market" days in Indian gaming, and its principal testified at trial that he supplied what are known as "Class III" (essentially slot machines) to most of the gaming tribes in California during the pre-1999 time period, a time when tribes lacked gaming compacts with the State of California. Federal law forbids Las Vegas-style, Class III gaming in California without a tribal-state compact.
Shingle Springs Defeats Slot Machine Supplier's Claim for $250 Million
PLACERVILLE, CA--(Marketwire - Dec 23, 2011) - On Dec. 22, 2011, an El Dorado County jury rejected a gaming machine supplier's claim for $250 million in damages against the Shingle Springs Band of Miwok Indians, in connection with the Tribe's cancellation of a machine lease agreement in 1999 for a failed tent casino venture called Crystal Mountain.
The jury did award a lesser amount of damages to Sharp Image Gaming, Inc., in the amount of $20.4 million, over the gaming contract, which the United States government has declared illegal and unenforceable -- a fact that the jury was not allowed to know. The jury also awarded an additional $10 million for monies invested in the failed venture. The Tribe will appeal.
"We will never stop defending ourselves against Sharp's effort to enrich itself through an illegal contract, which the Tribe cancelled in 1999, since the Tribe could not participate in an illegal agreement," said Nicholas Fonseca, Chairman of the Tribe. "The irony is not only that the federal government has deemed Sharp's contract illegal, but that the State's Bureau of Gambling Control has found Sharp to be unsuitable to sell or lease gaming machines in the State of California."
The jury was not allowed to know key pieces of evidence, including the fact that the federal agency that regulates Indian gaming and that is charged with reviewing gaming contracts -- the National Indian Gaming Commission -- issued a finding that Sharp's contract violated federal law and was thus illegal and void.
That finding -- issued in April 2009 -- was the result of a formal administrative proceeding in which Sharp participated.
The agency found that Sharp's contract violated federal law in a number of ways, including overreaching provisions that purportedly gave the contractor 30 percent "off the top" of all casino revenues, even before operating expenses. The NIGC's final agency action was consistent with earlier agency conclusions about the contract's illegal status; agency representatives told the Tribe in 1998 and 1999 that the contract would not pass federal muster and would not be federally approved as the law requires. After Sharp sued for alleged breach of contract in 2007, the NIGC's general counsel issued a publicly-available advisory opinion in 2008 that found the contract violates federal law and is void. The jury was not allowed to know about the 2008 NIGC opinion either.
Backed by case precedent and clear law, the Tribe's position is that the NIGC's final agency action in 2009 legally barred Sharp's ability to enforce its overreaching contract in state court. The state court rejected that position, and found that the NIGC's voiding of the contract does not matter. The Tribe filed suit in federal court to enforce that NIGC's federal agency action, and that federal lawsuit remains pending.
The jury also was unaware that Sharp is out of business and could not have supplied gaming machines to the Tribe anyway. The California Bureau of Gambling Control, which is the agency within the Department of Justice charged with protecting the integrity of gaming in the State of California, recommended to the California Gambling Control Commission that Sharp be found "unsuitable" to sell or lease gaming machine contracts in the State. This action was based on an investigation into Sharp and its principal, Chris Anderson, and came in November 2008, a month before Red Hawk opened to the public in December 2008.
"Because of that finding by the Bureau, we could not have used Sharp's machines under our Compact, even if Sharp remained in business," Chairman Fonseca said. "So the idea that Sharp somehow suffered money damages from being denied the right to supply gaming machines that it could not legally supply to anyone in this state makes no sense. It is really too bad the jury was not able to know this fact either."
Sharp had entered the contract with the Tribe in 1997, in an effort to establish gaming on the Tribe's reservation through a temporary tent facility. However, the lack of access to the Tribe's then landlocked reservation doomed the effort. The Tribe terminated the contract in 1999, after Sharp acknowledged it was unable to resolve the access problem for the reservation and based on information received from NIGC and BIA officials that the contract violated federal requirements.
The Tribe then proceeded to secure access for its reservation with the assistance of new and independent financial investors. The reservation became landlocked in the 1960s through the realignment of Highway 50. Although the access problem was not of the Tribe's making and could have been resolved by the Department of Interior for a cost of less than $5,000, the Tribe ultimately was only able to secure the access that was essential to any economic development on the reservation, including a gaming facility, through its own development of a highway interchange, which ultimately cost the Tribe nearly $70 million to construct and which faced years of legal challenges. After defeating those legal challenges and after beginning construction of the interchange and Red Hawk Casino, Sharp filed suit, claiming the exclusive right to supply all gaming machines to Red Hawk, and seeking 30 percent gross profits from Red Hawk revenues without performing at Red Hawk or being involved in its development in any way. Sharp claims the right to be paid before all others paid by Red Hawk, including the investors who assumed the risk of developing Red Hawk and the lenders who financed it.
"Because of evidentiary rulings that kept critical evidence from the jury, the Tribe was literally left without the ability to defend itself," said Ivor Samson, lead trial counsel for the Tribe. "We are confident that at the end of the day, an appellate court will be surprised by the sheer degree and number of serious legal errors infecting the rulings at the trial court level, and that the Tribe's rights ultimately will be vindicated, and the rulings reversed on the merits."
Sharp was a significant supplier of gaming devices during what is known as the "gray market" days in Indian gaming, and its principal testified at trial that he supplied what are known as "Class III" (essentially slot machines) to most of the gaming tribes in California during the pre-1999 time period, a time when tribes lacked gaming compacts with the State of California. Federal law forbids Las Vegas-style, Class III gaming in California without a tribal-state compact.
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